Wednesday, April 7, 2010

Consumer Price Index (CPI)

1. Anyone concerned with economic activity would be interested in the CPI. Along with the census, National Income Account, and the National Product Account, the CPI is one of the most closely watched national economic statistics. The index (especially in the U.S.) approximates the cost of living.

2. Two types are data are necessary in order to construct the CPI. They are price data and weighting data. The price data are collected from a sample of goods and services from a sample of locations from a sample of times. The weighting data are estimates of the shares of different types of spending as fractions of the total spending covered by the index. The index for the current time is then compared to that of a base year in this manner:
CPI= (Productrep X Pricecurrent)/(Productrep X Price11987*)

3.On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in February, the U.S. Bureau of Labor Statistics reported. Over the last 12 months, the index increased 2.1 percent before seasonal adjustment. (Bureau of Labor Statistics)

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